Iceland tourism prepares for a comeback
By Paige Mcclanahan
In a normal October, the Radisson BLU Saga Hotel in Reykjavik would be buzzing with tourists hoping for a glimpse of the Northern Lights, business travelers in town for trade fairs, honeymooners gearing up for a tour of Iceland’s waterfalls and geothermal spas. This year, of course, things are very different.
“It’s surreal,” said Ingibjorg Olafsdottir, the hotel’s general manager. “It’s completely quiet.”
Since March, even with government support, Olafsdottir’s staff has shrunk from 140 to just 16. The hotel, which has more than 200 rooms, normally has an occupancy rate of above 75%, but it fell to 11% in September.
“It’s been emotional,” Olafsdottir said, adding that, even after cutting down to bare-bones operations, the hotel continues to rack up debt. “But the thing is, I think everybody is in the same boat here.”
Tourism is undergoing an unprecedented downturn all over the world, but several factors make Iceland particularly vulnerable to the industry’s crash: geographic isolation, a small domestic population, strict border measures and an economy that — after an extraordinary, decadelong tourism boom — had come to depend heavily on foreign tourists. A recent surge in coronavirus cases has added to Iceland’s challenges.
But while visitor numbers are low, Iceland is positioning itself for a major tourism rebound after the pandemic. The government is investing more than $12 million in tourism infrastructure, while improving roads and harbors across the country. To keep the tourism industry afloat in the short term, the government is also investing more than $9 million in a program that distributes free travel vouchers to Icelandic citizens and residents. A marketing campaign targeting domestic tourists was rolled out in the late spring; an international version will be unveiled as soon as travel restrictions are lifted.
The government hopes that when people go to book their first post-pandemic flights overseas, Iceland will be at the top of their list.
The tourism boom
A lack of tourists was the last thing that Icelanders were worrying about in 2018, when the country welcomed a record-breaking 2.3 million visitors — more than six times Iceland’s population.
It was the height of a tourism boom that most observers trace to 2008, when a steep drop in the value of the Icelandic krona — which was linked to the economic crisis that hit the country that year — suddenly made Iceland much more affordable to outsiders. Then in April 2010, the cloud of ash from the eruption of Iceland’s Eyjafjallajokull volcano forced the temporary closure of a large swath of European airspace — and put Iceland into headlines around the world. The government had rolled out the “Inspired by Iceland” marketing campaign just a few weeks after the eruption hit the news, and what started as a travel nuisance turned into a giant publicity boon.
Tourism took off. Visitor numbers rose from 459,000 in 2010 to more than 2.3 million in 2018. Economically, tourism came to account for 8.6% of gross domestic product and 39% of the country’s total export revenue. Roughly 30,000 people — nearly 16% of Iceland’s workforce — were employed in the tourism industry in 2018.
Signs of tourism’s impact began cropping up in Reykjavik: Dunkin’ Donuts appeared in 2015 (all locations have since closed); a Hard Rock Cafe opened the following year; H&M arrived in 2017. In the countryside, sites that had once welcomed a handful of visitors were full of tour groups. Many tourists were seen parking their camper vans illegally, while others were caught defecating wherever they pleased.
“In a typical summer, you would see camper vans parked just about anywhere,” said Jenna Gottlieb, the author of the Moon Iceland travel guide and an American who has lived in Iceland since 2012. “That gets a lot of backlash from people because there aren’t toilets in a parking lot or wherever people are parking. It’s seen as so disrespectful.”
In 2015, a Justin Bieber music video transformed an obscure corner of the Icelandic countryside into a must-see spot for the Instagram crowd. The site — Fjadrargljufur canyon, which had little infrastructure in place when the video was filmed — was soon inundated with tourists. Iceland’s environmental agency later closed the site to visitors in the springtime, when the thawing earth is especially vulnerable to damage.
A survey of tourists in the summer of 2016 found that at all but two destinations — the popular Gullfoss waterfall and Geysir Geothermal Area — a majority of visitors weren’t bothered by the size of the crowds. Most Icelanders also remained positive about tourism. Indeed, the industry’s rise brought locals many benefits: a broader range of jobs and restaurants, more affordable flights to other parts of the world. Plus, many of them actually enjoyed having visitors. Unlike other European tourist hot spots like Venice and Barcelona, Iceland has no active anti-tourism movement.
Icelanders “are just warmhearted people who like to have visitors,” said Anna Dora Saethorsdottir, a professor of tourism at the University of Iceland. “We are proud of our culture, we are proud of our nature. When you’re proud of something, you also love showing it. Most Icelanders are very positive toward tourism.”
Concerns started to mount. Foreign experts and many Icelanders worried about the pressure that all those tourists were putting on the country’s fragile natural landscape. “Overtourism” appeared in a travel story about Iceland in 2016, and use of the term began to spread.
Of course, it wasn’t to last. In 2017, the Icelandic krona strengthened, making the country more expensive. In March 2019, WOW Air, an Icelandic low-cost airline, collapsed. Tourist numbers that year declined by about 14%, to just under 2 million. And then came 2020.
‘Everyone is crying’
The summer started off fairly well. Coronavirus numbers in Iceland were low and travel within Europe’s Schengen Area, of which Iceland is a member, began opening up. Travelers to Iceland could choose either to undergo a virus test on arrival or self-quarantine for 14 days. At the same time, the government rolled out a campaign to promote tourism among the island’s roughly 366,000 inhabitants, offering tourism vouchers worth 5,000 krona (about $36) to every Icelandic resident over age 18.
The summer was “pretty good, considering everything,” said Bjarnheidur Hallsdottir, the chair of the board of the Icelandic Travel Industry Association and the chief executive of two tourism companies. “And then suddenly out of nowhere, the government decided to change the rules at the borders. Since then, everyone is crying.”
Under the new rules, which took effect on Aug. 19 and are still in place, arriving passengers may choose either to submit to two screening tests for the virus, separated by five days’ self-quarantine, or to skip border screening and self-quarantine for 14 days after arrival.
“Given the uptick in infections worldwide and the widespread effect that a small infection can have on the functioning of our society, the Government has decided to strengthen our border-screening measures to further limit the number of infections entering the country,” Prime Minister Katrin Jakobsdottir said when the rules were announced.
When the new measures took effect, Hallsdottir said, tourist numbers plunged. And while virus cases remained low for most of the summer, the country has registered a wave of new infections since mid-September, even with the new measures in force. Many of the recent cases have been linked to a pair of French tourists who tested positive for the virus when they arrived in the country, but then failed to isolate, Iceland’s Visir.is news outlet reported. On Oct. 5, the government ordered bars, nightclubs and gyms to close, and banned most gatherings of more than 20 people.
As in most parts of the world, the tumult of the last several months has triggered a surge in unemployment in Iceland. Between March and August of this year, about 8,000 people — roughly 4% of the country’s labor force — were laid off, according to Iceland’s Directorate of Labour; most of those layoffs were in the tourism industry. Iceland’s unemployment rate reached 8.5% in August, compared to just 2.5% two years earlier. The agency predicted a rise in job losses in September and October.
Hallsdottir says that tourism operators are now looking to the government to help them cover running costs, or to pay the wages of a few personnel who can keep the companies afloat.
“If no one answers the phone or answers the emails, there will be no tourism next year,” she said.
Investing for the future
After the 2008 banking crisis, Iceland’s tourism boom helped to propel the country into an impressive economic rebound. But while the rapid growth in foreign arrivals created jobs and revenue, it also outpaced the government’s ability to build the infrastructure that was needed to manage so many new visitors. Now, with tourist numbers low, the government has a chance to catch up.
This year, the Icelandic government is investing roughly 1.7 billion Icelandic krona (about $12.3 million) in infrastructure at both public and private tourist spots across the country, said Skarphedinn Berg Steinarsson, director general of the Icelandic Tourist Board. Roughly 1 billion krona has been set aside for infrastructure at national parks, protected areas and large public tourist sites, while 700 million krona is going into the country’s Tourist Site Protection Fund. The investments were already being planned last year, but the government increased the funding after the pandemic hit. Further investments will support harbor and road improvements throughout the country.
The improvements at tourist sites have two goals, Steinarsson said in an interview, “allowing them to receive bigger numbers — creating parking spaces, walking paths, etc. — but also preserving the nature to make sure that the sites will not be worn down when we get the visitors back.”
The largest grants from the Tourist Site Protection Fund are supporting the construction of a viewing platform on Bolafjall Mountain in the Westfjords, he said, as well as infrastructure at Studlagil Canyon, where a viewing platform is being installed as well as new walkways, toilets and information signs. These improvements are meant to keep tourists safe (the Bolafjall site features a steep cliff), while also protecting the landscape from environmental damage and improving the overall visitor experience.
The Studlagil Canyon is an example of a phenomenon that is not uncommon in Iceland: a site that was created not by the hosts, but by the visitors. The canyon — which features dramatic basalt-column cliffs lining the banks of a glacial-fed river — was “discovered” as an attractive destination only recently, Steinarsson said, after the river’s flow was made much calmer following the construction of a nearby hydroelectric plant.
“This is one of those sites that are created on social media,” Steinarsson said. “But there’s no infrastructure there, no parking sites, no toilets. What happens when you start allowing 100,000 or 500,000 visitors? Everything gets torn down because nothing is designed to accommodate that.”
Now the government is working with the owners of the land to build pathways, parking spaces and toilets. The goal, Steinarsson said, is to ensure that visitors can enjoy the site “without spoiling anything.”
The kind of infrastructure being installed at Studlagil is already in place at most of Iceland’s more established destinations, particularly in the Golden Circle — an area not far from Reykjavik that includes some of the country’s most famous tourist destinations: Gullfoss waterfall, Geysir Geothermal Area and Thingvellir National Park, among other spots. While the infrastructure in those areas is already fairly good, Steinarsson said, any areas that are particularly fragile will need continual upkeep — and funding — to protect against damage from visitors.
Plenty of Icelanders would have seen these places over the last several months, and enjoyed them with smaller crowds than usual. A marketing campaign encouraging Icelanders to explore their country was rolled out in the late spring (“Island — komdu med!” or “Iceland — come join us!”), while the government’s travel voucher campaign helped to jump-start demand for hotels, restaurants and attractions. So far, Icelanders have used more than $1.2 million worth of their free travel vouchers, which are valid through the end of the year. The most popular spots have been FlyOver Iceland, an attraction in Reykjavik; Islandshotel, a hotel chain; and Blue Lagoon, the geothermal spa near the country’s biggest airport.
“It was a success,” said Steinarsson of the efforts to encourage domestic tourism. “Icelanders really enjoyed their country during the summertime. And that’s what counts.”
What will Icelandic tourism look like after travel restrictions are finally lifted? Several people interviewed expressed the hope that future tourists would make longer visits and take the time to explore less popular corners of the country.
“If you get off the beaten path a little bit — and you don’t even have to go that far — you can get more of a remote feeling, a more private version of Iceland,” said Gottlieb, the travel guide author.
It’s a kind of travel that seems in line with how consumer attitudes have shifted during the pandemic, said Peter Jordan, head of strategy and research at Toposophy, a destination marketing and management agency. People are looking for “open spaces, fresh air, nature, walking routes, cycling trails, outdoor activities, and perhaps a much slower form of travel,” he said in an interview. By those measures, Iceland — which has the lowest population density in Europe — scores very well indeed.
Even Olafsdottir, the hotel manager, was optimistic about the country’s prospects for post-pandemic tourism.
“The population is so small and the country is so big,” she said. “For Iceland, that’s a huge opportunity.”